USD/VND Exchange Rate Expected to Stabilize in Second Half of 2024, HSBC Forecasts

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The USD/VND exchange rate has witnessed a notable uptrend, marking a surge from VND130 to 170 at commercial banks since the month’s onset. Citing data from the General Statistics Office, January witnessed a 0.52% escalation in the USD price index compared to December 2023, and a substantial 3.69% surge compared to the corresponding period last year.

In tandem, the free market experienced a pivotal juncture as the USD price breached the VND25,000 mark last week, a threshold unseen since October 2022, and continues to maintain its position above this level.

Ngo Dang Khoa, the Country Head of Markets and Securities Services at HSBC Vietnam, delineates two principal factors catalyzing the USD’s ascent in January 2024. Firstly, buoyed by optimistic indicators from the US labor market and economy, coupled with affirmations from Federal Open Market Committee (FOMC) members regarding data-centric policies, market sentiments have tempered expectations of an imminent FOMC interest rate adjustment. Consequently, a marginal uptick in US Treasury yields has fortified the USD’s global stance, as evidenced by the Dollar Index (DXY) surpassing the 103 mark.

Notably, the pronounced divergence in monetary policies between the Federal Reserve and the State Bank of Vietnam (SBV) may amplify further, with Vietnam prioritizing growth support initiatives amidst prevailing economic conditions. While Vietnam maintains relatively abundant VND liquidity, underscored by sustained credit growth and public investment disbursements, external factors such as global geopolitical shifts may negatively influence the VND’s stability.

Anticipating these dynamics, HSBC forecasts a persistent upward pressure on the USD/VND exchange rate throughout the initial quarter of 2024. Nevertheless, a glimmer of optimism emerges as the year progresses, with expectations of a stabilizing exchange rate in the latter half, buoyed by the USD’s zenith and gradual recovery of the domestic economy and credit landscape.

In a forward-looking projection, Khoa asserts HSBC’s anticipation of the USD/VND exchange rate culminating the year within the range of VND24,400, indicative of prospective market developments and economic trajectories in the months ahead. As Vietnam navigates through the complexities of global financial markets, stakeholders remain vigilant and poised to adapt to evolving dynamics and seize emerging opportunities for sustainable growth and stability.